In 2012, the company achieved operating income of 1,643 billion yuan, an increase of 15.8%; operating profit of 109 million yuan, an increase of 8.59% over the previous year; net profit attributable to owners of the parent company of 98.84445 million yuan, an increase of 6.06% over the previous year; and basic earnings per share of 0.182 yuan. There was a slight decline in corticosteroid income. During the reporting period, the company's corticosteroid APIs achieved revenue of 989 million yuan, an increase of 8.75% over the previous year. Affected by shrinking demand in the veterinary drug market and improving quality standards in the new Pharmacopoeia, sales of the company's main product, dexamethasone series, have been affected to a certain extent. However, the company has stepped up market development efforts for other high-profit varieties, and sales of varieties such as triamcinolone, triamcinolone acetate, and clobetasol propionate have maintained a relatively rapid growth, with a year-on-year increase of 26-33%. Intermediate products achieved revenue of 415 million yuan, a significant increase of 86.07% over the previous year. Pharmaceutical products achieved revenue of 79.44 million yuan, a year-on-year decrease of 38.22%. Costs rose to a point where gross margin declined. Since 2012, saponin prices have continued to rise, and rising costs have had a certain adverse impact on the company's profitability. The gross margin of the company's corticosteroid APIs fell 2.51 percentage points year on year, dragging down the overall gross margin by 1.77 percentage points year on year to 16.78%. In the same period, the company's fee rate for all three categories decreased. The period fee rate decreased by 1.91 percentage points year-on-year to 9.58%. Taking quality to the next level and actively developing formulations. Currently, the company's 2 products, including prednisone, have passed on-site certification from the US FDA, and 6 products have obtained European CEP certificates. Currently, all of the main products have met European and American pharmacopoeia standards, and are exported to more than 50 countries and regions including Europe, America, and Southeast Asia. In 2012, the company fully initiated the quality upgrade of the new European Pharmacopoeia standards. Major breakthroughs were made in technical research on semethasone sodium phosphate products, which reached the leading international level of the 7.5 edition of the European Pharmacopoeia after improvement. In the US market, taking advantage of the main product, dexamethasone, which has obtained US FDA certification, the company continues to apply for DMF documents for dexamethasone sodium phosphate. At the same time, a new product (raw material and preparation) of methylprednisolone and its tablet varieties for the treatment of arthritis and rheumatoid arthritis has met the latest USP Pharmacopeia standards. It has submitted generic drug ANDA documents to the US FDA, and is expected to pass FDA certification within the next 1-2 years. In the future, the company's pharmaceutical products are also expected to enter the international high-end market. Additional distribution continues. According to the company's private issuance plan for May 2012, the number of shares to be issued shall not exceed 101 million shares (inclusive), the proposed capital shall not exceed 550 million yuan, and the issue price shall not be less than 5.49 yuan/share. The capital raised is mainly invested in 1) acquisition of Tianan Pharmaceutical amino acid API assets; 2) Jinyao biological sewage treatment assets 3) corticosteroid API technology transformation, upgrading and production expansion projects. After the distribution is completed, the company will add an amino acid API business, which can achieve synergistic effects between amino acid APIs and the company's existing corticosteroid APIs. The API assets owned by Tianjin Pharmaceutical Group Co., Ltd., the controlling shareholder of the company, are expected to be fully listed. It has now been approved by the Securities Regulatory Commission. Saponins continue to rise, and advanced technology enjoys a cost advantage. In recent years, the state has stepped up environmental supervision, eliminated some small and medium-sized saponin manufacturers, and the supply of saponin has become tighter. The price of saponin has continued to rise since 2007. In 2012, domestic saponin prices rose from 555 yuan/kg at the beginning of the year to 965 yuan/kg in November, reaching a record high. The average price in 2012 increased significantly by 42.5% compared to the previous year. Although the price of saponin dropped slightly in early 2013, it is still around 910 yuan/kg. Since the company has taken the lead in breaking through the bottleneck of diosgenin resources, it has become the only company in China that has the technology to synthesize corticosteroid drugs using two starting materials, saponin and androstenedione. As the price of saponin continues to rise, the company's phytosterol production route can reduce its dependence on saponin and has a strong cost advantage. Profit forecasts and ratings. The company's 2013-2014 EPS is expected to be 0.19 yuan and 0.22 yuan respectively. Based on the latest closing price, the corresponding dynamic price-earnings ratios are 32 times and 28 times, respectively. Maintain a “neutral” investment rating. Risk warning: 1) The risk of large fluctuations in the price of API products. 2) The risk of RMB appreciation and changes in export tax rate policies. 3) The risk of increased environmental pressure.